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Chevron: Lowest Dividend Yield, High Valuation

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May. 28 2019, Published 2:08 p.m. ET

Chevron’s dividend yield

Chevron’s (CVX) dividend yield of 4.0% is the lowest among the six integrated energy stocks we’re looking at. Royal Dutch Shell (RDS.A) has the highest dividend yield, of 6.0%, and BP (BP) and Total (TOT) follow with 5.9% and 5.4% yields, respectively. ExxonMobil (XOM) and Suncor Energy (SU) have lower yields of 4.7% and 4.0%.

This quarter, Chevron’s quarterly dividend is set to rise 6% YoY (year-over-year) to $1.19 per share. Chevron stock has fallen 6% in the last year and 4% this quarter. The company aims to buy back ~$5 billion in stock per year. For the past several quarters, its robust cash flow has been backed by its record upstream volumes and stock buyback program. Chevron bought back $0.5 billion in stock in the first quarter.

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Valuation

Chevron’s forward PE multiple of 14.8x is higher than peers’ average. Its forward EV[1.enterprise value]-to-EBITDA multiple of 6.0x is also above the peer average of 5.4x. Likewise, ExxonMobil’s (XOM) and Suncor’s (SU) multiples are above peers’ average. 

Chevron’s higher valuation is likely due to its robust upstream portfolio. In the first quarter, Chevron’s upstream volumes grew 7% YoY to 3.04 million barrels of oil equivalent per day, and this growth is expected to continue. The company expects its upstream volumes to grow 4%–7% this year.

However, analysts expect Chevron’s earnings to fall marginally this year, by 2%, due to lower oil price estimates. They expect Shell’s, Total’s, and Suncor’s (SU) to rise 10%, 7%, and 23%, respectively, this year, and BP’s and ExxonMobil’s (XOM) to fall 8% and 17%. Among the six stocks we’ve looked at, Chevron has the lowest dividend yield and a higher valuation. The company’s earnings could fall marginally this year.

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